They’re called “neutrality agreements.” Their supporters say they promote labor peace during union organizing drives. Yet too often these pacts grant a union a blank check to box in a targeted employer. Fittingly, not all workers are happy about this. On November 13, the U.S. Supreme Court heard arguments over the extent to which federal law allows a union to use a neutrality agreement to extract concessions. The case, UNITE HERE Local 355 v. Mulhall et al., has its origins in a complaint by an employee of a Florida dog track-casino following the employer’s agreement with the union in 2004. A federal appeals court in January 2012 had ruled 2-1 that the arrangement violated a section of the Taft-Hartley Act barring an employer from offering things of value to a union – and vice versa. A decision is expected by next June.

Whenever a union decides to launch an organizing campaign, its officials have an interest in minimizing employer resistance. Toward that end, organizers may attempt to pressure the employer into refraining from expressing opposition of any kind and even providing support for the union. In return, the union forgoes hostile actions against the employer such as onsite picketing or a strike. Additionally, it may contribute time and money to promote a particular set of interests of the employer. Under the guise of “neutrality,” these deals create a level playing field and ease tensions between labor and management. But on closer inspection, the process is coercive. And the coercion comes mainly, if not exclusively, from the union. Indeed, one would be hard-pressed to find a neutrality agreement that doesn’t involve the imposition of union will upon an employer on some level. Moreover, the terms of an agreement may run counter to guidelines established by the courts and/or the National Labor Relations Board (NLRB). The union’s vow to refrain from publicly criticizing the employer can be a hollow gesture because the main goal is to force the employer, however reluctantly, into the role of business partner.

Employer gag rule. Neutrality arguments commit a nonunion employer to remain nonpartisan during the organizing process. Yet in practice, silence works against employers. For by forcing an employer’s managers and supervisors to refrain from uttering any and all criticism, the union effectively creates a situation in which employees are exposed to the pros, but not the cons, of union membership. This in turn may make them more apt to join.

Card checks. A card check is an organizing tool in which a union seeks to gain recognition as a bargaining agent without necessarily having to go through an NLRB-supervised secret ballot election. During a card check, union organizers approach employees at a nonunion work site, hand them a membership pledge card, and request that they sign it. If and when signed, the card functions as a ballot. Experience has shown that unions use deceptive and/or high-pressure tactics to induce signatures – tactics, in other words, to which most employers would strenuously object. But if management has signed a neutrality agreement, there isn’t much they can do about union intimidation of the workers. Moreover, neutrality agreements often commits the employer to recognizing a union if the card check yields a certain minimum percentage of signatures. With a simple majority, the union wins representation rights and bypasses the election process.

Union access to worksites. Very often a useful adjunct to a card check, an access clause grants a union an unlimited right to use an employer’s property during working hours. This type of clause runs counter to guidelines set by the NLRB and the courts which give an employer the right to refuse such access by union organizers.

Union access to employee information. Neutrality agreements may grant a union access not just to company property, but also to confidential information about employees, especially home addresses. In this way, union organizers can visit workers at their homes and pressure them to sign pledge cards.

‘Captive audience’ presentations. This type of clause forces employees to attend workplace speeches about the advantages of belonging to a union. And it compels the employer to co-sponsor such presentations at its own expense. Unions often tout these events as “partnerships” to convey a sense to workers that representation is virtually inevitable.

Formally, employers have the right to say “no” to neutrality agreements. Yet unions have ways of coaxing a “yes” from them. They include pickets, boycotts, threats and corporate campaigns, the latter being all-out public-relations efforts to inflict damage upon the reputation of the company, often in highly personalized ways. In certain jurisdictions, employers lack legal recourse to resist. Worse, as in the case of the San Francisco Airport Authority, states and localities may force private-sector contractors to sign an agreement if they want to do business with public agencies. To sum up: There is little that is neutral about neutrality agreements.

The Mardi Gras Casino, a dog track and casino in Hallendale Beach, Florida, opened back in 1934 and located in the southeast corner of Broward County just north of the Miami-Dade County line, has found itself in the thick of this debate. Nearly a decade ago casino management and the union signed a neutrality agreement to promote their respective interests. This deal became the basis for the current Supreme Court case. The facility, at the time known as Hollywood Greyhound Track, was the target of a UNITE HERE Local 355 organizing drive. UNITE HERE is a powerful force in the hospitality industry that likes to throw its weight around when it senses vulnerability in a nonunion employer. And back in 2004 the management of Hollywood Greyhound Track seemed a good target. Florida voters were preparing to vote in November on whether to amend the state constitution to allow Broward and Miami-Dade Counties to decide whether to allow the placement of slot machines at existing parimutuel betting facilities (e.g., racetracks). Management, anticipating a huge new revenue stream, strongly supported the measure. The Miami-based UNITE HERE Local 355 saw a business opportunity.

Union leaders pitched a quid pro quo to Hollywood management: We’ll support the referendum if you let us unionize your work force. On August 23, 2004, the two sides finalized a deal. The union would spend more than $100,000 in support of the gambling initiative, known as Amendment 4, and would refrain from picketing, boycotting or striking. In return, management would: 1) provide information about workers to the union; 2) permit union organizers on its premises; 3) allow the union to conduct a card check; and 4) remain neutral about unionization. The agreement may well have swung the outcome. Amendment 4 passed by a slim margin of 50.83 to 49.17 percent. A “Yes on 4” campaign, organized by a group calling itself Floridians for a Level Playing Field, spent about $15.5 million. Of that sum, Hollywood Greyhound Track spent $820,000, which actually was nowhere near what top casino-racetrack donors kicked in. By contrast, the “No on 4” opposition spent a combined $303,223.

With voter approval achieved, Hollywood Greyhound Track management was satisfied. In 2006 it renovated the premises, and added about 1,100 slot machines and a poker room. It also renamed itself Mardi Gras Casino. UNITE HERE Local 355, which represents workers at a number of South Florida racetracks and casinos, likewise was satisfied given the new opportunities to attract dues-paying members. But racetrack-casino employees weren’t necessarily satisfied. One worker in particular, Martin Mulhall, did more than complain. He filed suit in federal court against both Mardi Gras Casino and UNITE HERE Local 355. As the lead plaintiff, Mulhall argued that the neutrality agreement violated Section 302 of the Labor-Management Relations Act (i.e., the Taft-Hartley Act of 1947), which prohibits an employer from giving, or a union from receiving, a “thing of value” in the course of organizing or collective bargaining. He sought to enjoin enforcement of the agreement.

Initially, Mulhall, who was opposed to unionization, went nowhere. The district court refused to review the case, holding he was not harmed by UNITE HERE seeking to represent him. Because Section 302 was conceived as an anti-corruption device and because there was no indication of corruption in this case, the court argued, the complaint lacked legal standing. Mulhall then appealed – successfully. In reversing the lower court, the U.S. Court of Appeals for the Eleventh Circuit argued that the definition of a “thing of value” could extend to promises made by an employer to a union as part of a neutrality agreement. The court reasoned:

A violation of Section 302 cannot be ruled out merely because intangible assistance cannot be loaned or delivered. Section 302 also prohibits payment of a thing of value, and intangible services, privileges, or concessions can be paid or operated as payment. Whether something qualifies as a payment depends not on whether it is tangible or has monetary value, but on whether its performance fulfills an obligation. If employers offer organizing assistance with the intention of improperly influencing a union, then the policy concerns in Section 302 – curbing bribery and extortion – are implicated.

The circuit court then remanded the case to the lower court, instructing it to consider the motives behind the agreement. It also clarified that setting the ground rules for an agreement is permitted, but attempting to influence a union out of its representation duties is not. In other words, the court was sympathetic to the plaintiff, but in no way extended that to management. The district court, however, once again dismissed Martin Mulhall’s complaint. In response, Mulhall once again appealed – and won. In response, UNITE HERE Local 355 appealed the ruling to the U.S. Supreme Court, which granted certiorari this June 24 and heard arguments on November 13.

The High Court is examining whether neutrality agreements are unconstitutional under certain circumstances. A ruling would clarify the point at which an employer or a union steps over the line to demand or receive cash, goods, services and other things of value. The issue at hand is whether UNITE HERE Local 355 engaged in self-dealing rather than worker representation. UNITE HERE International Counsel Richard McCracken, a senior partner at the San Francisco firm of Davis, Cowell & Bowe, believes the local pursued legitimate interests. “Many employers and unions find agreements such as this useful to avoid conflict during organizing campaigns,” he told the court. “They (the agreements) are efficient. They avoid the hard feelings that come in many contested organizing campaigns and thereby create a good environment for collective bargaining.” Deputy Solicitor General Michael Dreeben, arguing the case for the government on behalf of UNITE HERE, added that the Supreme Court previously has upheld the legality of card checks. Section 302, taken in full context, allows for negotiation of organizing campaign ground rules.

But the union’s definition of legitimate behavior, in fact, may be too broad. William Messenger, an attorney with the Springfield, Va.-based National Right to Work Legal Defense Foundation representing Martin Mulhall, argued that a strict ban on union self-dealing must be defined as something more than simply a ban on employer gifts. He remarked: “If the employer gives this assistance and the union gives something in return – for example, here the $100,000 political campaign and the agreement not to strike – then it becomes a payment because the consideration shows payment.”

The Supreme Court, predictably, is divided. Justice Ruth Bader Ginsburg emphasized that the circuit court’s decision was not against neutrality arguments per se, but against the rationalization by the lower court. Justice Stephen Breyer cautioned against taking the term “things of value” too literally. As an analogy, he asked: “A sign says ‘No vehicles in the park.’ OK? Does that apply to a Jeep used as a war memorial? Answer: No.” But Justice Samuel Alito Jr. countered that a portion of the union-driven terms may have constituted extortion. “Why wouldn’t the right to use private property in a way that otherwise wouldn’t be allowed constitute a thing of value?,” he asked. Gaining automatic access to company grounds – i.e., private property – would seem to qualify as a thing of value. In a similar vein, Chief Justice John Roberts said that it would be highly difficult to see how racetrack management’s acceding to the union’s demand for a card check campaign, as opposed to a secret ballot election campaign, could not qualify as a benefit. And even liberal Justice Sonia Sotomayor admitted that UNITE HERE’s pledge to spend over $100,000 on passage of the referendum constituted corruption if it was intended to buy management recognition of the union.

The case is highly significant. At no time in the past has the Supreme Court been faced with a case that tests the legality of neutrality agreements as far as this one. And the decision, due in about a half-year, would have a dramatic effect. If the court rules in favor of Mulhall, it will have curtailed the circumstances of such agreements. If it rules in favor of UNITE HERE, it will have vastly expanded those circumstances, in the process further distorting the meaning of the word “neutral.” When it comes to achieving labor peace, unions aren’t averse to combat in the courtroom.

Postscript: On December 10, 2013, six days after this article was published, the U.S. Supreme Court dismissed the Mulhall petition as “improvidently granted,” effectively reinforcing the coercive power of unions with respect to neutrality agreements.